Section 199A of the Internal Revenue Code, introduced by the Tax Cuts and Jobs Act (“TCJA”), created an opportunity for business owners to substantially lower their income taxes. Subject to many qualifications, beginning in 2018, business owners were potentially eligible for up to a 20% deduction on “qualified business income” (“QBI”). For those owning a…

Recognition of Internal Revenue Code (“I.R.C.”) § 280E and its potential to limit deductions can have a material impact on the ongoing operation of a cannabusiness. While operational concerns require attention, improper tax classification of an entity can result in unnecessary additional tax being owed. In Loughman v. Commissioner, T.C. Memo 2018-85, the United States…

In a December 2018 letter to Governor Hogan, the President of the Senate, and the Speaker of the House, the Maryland Medical Cannabis Commission (“MMCC”) discussed plans to fund the Compassionate Use Fund.[1] As medical cannabis is categorized as a Schedule I drug and is not recognized for medical use by the federal government (more…

The smell of tax season is in the air. Accountants and tax attorneys alike are sharpening their pencils, replacing the batteries in their calculators, and stocking up on coffee. But something feels different this year. . . The Tax Cuts and Jobs Act (“TCJA”). Everyone has heard about it, but what exactly does it mean…

When it was announced that the Tax Cuts and Jobs Act included a new 20% deduction for qualified business income (“QBI”) of pass-through businesses, many business owners started planning for huge tax savings. Hopefully, their exuberance was not misplaced and was based on a thorough review of the new tax law. Aside from many types…

Along with the recent issuance of regulations under section 199A of the Internal Revenue Code (“I.R.C.”), the Internal Revenue Service (“the Service”) also published a revenue procedure setting forth a safe harbor under which rental real estate will be treated as a “trade or business” pursuant to I.R.C. § 199A. For those in the real…

From its inception, Section 199A made it fairly clear that the deduction for qualified business income (“QBI”) would not apply to all income in respect of pass-through businesses. Aside from limitations dependent on the nature of the industry (i.e., the “specified service trade or business” provisions of I.R.C. § 199A(d)(2)), the total wages paid to…

Although Section 199A will reduce the tax burden for many owners of pass-through businesses, classification as a “specified service trade or business” (“SSTB”) can severely limit its application for many others. While certain businesses will find it extremely difficult, if not impossible, to avoid such a classification (e.g., law firms, accounting firms, consulting firms), there…

Since the passage of the Tax Cuts and Jobs Act, business owners and tax practitioners alike have focused on the potential effect of Section 199A. Though it has been clear for some time that the 20% deduction afforded to those with “qualified business income” would be a boon for businesses structured as pass-through entities, it…